A high-rise goes up on Buffalo Speedway. Owners of commercial property are backing a disputed measure.

Photo: Karen Warren, Staff Photographer

A local trade association for commercial property owners has come out in favor of a controversial vote that would send millions of local tax dollars to the state to be distributed among poorer school districts.

The local chapter of the Building Owners & Managers Association warned this week that rejecting the so-called recapture measure could saddle some of the city's premier commercial properties with higher tax bills and make them less competitive. BOMA's local head says there are simply too many unknowns.

At issue is the state's decision to reclassify the Houston Independent School District as "wealthy." Because of that, funding laws require the district to pay an estimated $162 million next year to the state for redistribution as part of the "Robin Hood" school funding plan. In previous years, HISD received additional money from the state through the plan.

Mayor is opposed

On Nov. 8, voters will be asked to authorize the coming recapture payment. But Houston Mayor Sylvester Turner has called on voters to reject the measure in hope lawmakers will make meaningful changes to the school funding system during next year's legislative session.

That's a gamble Betancourt does not want to take. If the recapture is turned down, the most valuable properties within HISD's boundaries would be reassigned to another, as-yet-undetermined district for property tax purposes. Depending on the rates in the recipient district, owners could see their already soaring tax bills rise even more.

That could affect scores of high-profile properties, including downtown's Houston Center, Pennzoil Place and Chase Tower. Betancourt said some owners could face an unfair competitive advantage if they are paying a different tax rate than their neighbor.

"It puts the whole market into question," she said.

Lack of understanding

Moreover, the ballot measure does not appear to be widely understood.

"It seems like the bulk of the people aren't aware of the issue," said Brett Williams, director of property management for Houston-based PM Realty Group, which owns and manages commercial properties. "This kind of came out of nowhere for us three or four weeks ago."

If the measure is rejected, the state would have to "detach" an estimated $18.25 billion worth of properties in order to bring HISD's wealth level down, according to the Texas Education Agency, which does not yet have a list of potentially affected properties.

Even owners of less valuable properties could be at risk of higher school taxes down the road, Williams said.

Permanent condition

The building reassignments are permanent, and he questioned where HISD is going to make up its lost revenue.

"Is the rate going to go up on the remainder of the buildings?" he asked.

Betencourt said BOMA believes HISD should pay the recapture to the state "and not force the Legislature's hand on their detachment and reattachment of $18 billion of real estate value that they will never get back."

Other school districts pay recapture funds to the state. No other district has had the state reassign properties, TEA spokeswoman DeEtta Culbertson said.

"There was one district a few years ago that talked about it, but when they found out they would lose their property they decided they would pay their recapture," she said.

Other costs are up

Meanwhile, Williams said, costs to operate Houston's biggest commercial properties have shot up in recent years. It's not uncommon for property taxes to make up 50 percent of a landlord's expenses, he said.

"Anything you do to change your tax burden affects your competitiveness of the market," Williams said.

Nancy Sarnoff covers commercial and residential real estate for the Houston Chronicle and the paper’s two websites: Chron.com and HoustonChronicle.com. She also hosts Looped In, a weekly real estate podcast about the city’s most compelling people and places. Nancy is a native of Chicago but has spent most of her life in Texas.